The US statistics seem encouraging and many of the popular pundits seem to be getting very excited, saying the worst is behind us.

To add to this, UK Chancellor Gordon Brown has based his finances on a growth in world trade of more than 5% for next year, so maybe 2003 could turn out to be a cracker.

What we have been seeing I believe, is the stunning art of the Christmas window dressing

Justin Urquhart Stewart on recent market rise

However, at the risk of sounding like a party pooper, I am still very concerned.

Some advisors seem to have all the confidence of Buzz Lightyear ready to leap off the windowsill.

Time then for a touch of realism.

Profit concern

Since the lows of September, we have seen a rally in a short period of time, and to be fair many of the corporate results have been meeting expectations.

However, these expectations had in fact been set to much lower levels, so there was little to get excited about.

More concerning still are figures for companies' profit margins, which show firms are still under significant pressure.

Without pricing power, many companies will still suffer from price deflation, and thus corporate profits will only come from further cost cutting.

That is not exactly a great growth recipe.

Window dressing

Additionally, some of the enthusiastic statistics coming out of the US also require a little tempering.

The most recent US economic output figures imply 4% growth.

But after removing discounted car sales and government defence and health expenditure, we are left with something close to zero - not an entirely brilliant picture for the stock market.

Unfortunately, I still believe that we are in a bear market and the grumpy beast is currently only hibernating.

What we have been seeing, I believe, is the stunning art of the Christmas window dressing.

Our markets are glistening with shiny attractive baubles designed to make all our investment funds look wonderfully festive.

But like all Christmas decorations, I wonder what they will look like by the second week in January when they have lost their wonder.

Of course these decorations do attract many, and we can already see some brave souls coming back into the market - this is evident from the recent increase in ISA sales.

Grumpy beast

Over the past few months the recovery in equities has been encouraging and experienced traders have been fleet of foot enough to make some good returns.

Justin Urquhart Stewart says the bear is only sleeping

However, bear in mind that these can be dangerous waters for private investors, where volatility in both directions can easily catch them out.

The secret of success is to ensure that you have a proper allocation and spread of your investments across the different asset classes of not only equities but also bonds, property and, of course, cash.

Unfortunately, I still believe that we are in a bear market and the grumpy beast is currently only hibernating.

Rune reading

The key as to whether the market rises or falls in the New Year is how the City reads the runes of possible economic recovery late next year or in 2004.

The market looks forward from habit, and if it can see some positive signs then it will react accordingly.

So where do we find these signs?

First, look to companies reporting an upturn in confidence and even an improvement in their margins.

Nevertheless, we will see further corporate failures as well as takeovers and mergers.

This will all help to take out excess capacity and allow those that are left to start growing again.

Until then, we will be dependent upon the continued spending of Gordon Brown, and the goodwill of consumers to do the same.

But beware, if we borrow and spend too much as signs of recovery come through, rates will rise and many will find their debt position looking worse.